In 2019, Switzerland, a long-standing player in the financial sector, committed to achieving zero net greenhouse gas emissions by 2050. Finance represents a significant lever for action in achieving its climate objectives. Accordingly, the Swiss government has adopted an ambitious regulatory agenda for sustainable finance for the period 2022-2025. For Switzerland, this marks a break with its liberal tradition of market-based regulation.
The years 2024 and 2025 will be characterized by the entry into force of a growing number of requirements for Swiss financial players, particularly with regard to transparency of information. WeeFin can help you decipher these regulations:
In February 2022, the Swiss Confederation introduced the Swiss Climate Scores, an assortment of transparency criteria that enable investors to compare the alignment of financial products with the objectives of the Paris Agreements. The Scores focus on the performance of products on climate issues: to this end, they include quantitative indicators calculated at portfolio level and qualitative fields specifying the management company's strategy. The Climate Scores are accompanied by a formal template created by the Swiss financial players' associations, detailing indicators and methodologies.
To date, the Scores cover six reporting themes: (1) greenhouse gas emissions, (2) fossil fuel exposure, (3) credible climate dialogue, (4) verified net zero commitments, (5) net zero management, and (6) global warming potential. Two additional optional indicators dedicated to the investment objective of a financial product and to renewable energies will come into force definitively from January 2025.
The publication of information in line with the Swiss Climate Scores framework is a voluntary exercise. This is good practice in the Swiss financial marketplace, and helps to promote the sustainability credentials of products marketed by the players involved.
All financial product managers
The development of sustainable finance in Switzerland depends on companies taking responsibility for their environmental, social and governance practices. This conviction, supported by the popular initiative "For responsible businesses - protecting human rights and the environment", led to the adoption of a series of laws addressed to large Swiss companies in June 2020. Among the new requirements is the obligation for large companies (including financial companies) to publish an annual report on non-financial issues.
This report will have to report on "environmental issues, particularly CO2 targets, social issues, personnel issues, respect for human rights and the fight against corruption" where these are significant for a company. To clarify its expectations regarding environmental information, the Confederation has adopted the TCFD climate reporting framework, to which it has added considerations relating to corporate impact and transition.
The first non-financial reports are expected in 2024. Climate disclosure aligned with TCFD will come into effect the following year: the first reports are expected in 2025 for fiscal year 2024.
Swiss companies :
Note: the regulations will be amended in mid-2024 to bring them into line with CSRD requirements, by including companies with 250 FTE or more.
Subsidiaries of a company covered by the regulation or publishing similar information under foreign law are excluded from the scope of the regulation.
Art. 964a-c of the Swiss Code of Obligations: Transparency in non-financial matters
Ordinance on reporting on climate issues
The Swiss Stewardship Code is a set of recommendations relating to responsible active investment management. It was adopted by the Asset Management Association (AMAS) and Swiss Sustainable Finance (SSF) in October 2023, and aims to support the development of best practice and improve the comparability of the activities of players in the financial marketplace. The Swiss Stewardship Code is applicable on a voluntary basis: it is a best practice that can be communicated publicly. It comprises nine stewardship principles and describes the most important elements for their effective and successful implementation.
Among its principles, the Swiss Code includes the requirement to publish an annual stewardship report detailing the nature and results of its responsible management activities. This report must include the financial player's management priorities, the main themes to which it has committed during the year and the progress it has made.
Asset owners, asset managers and financial services
The Swiss Federal Council published its position on the prevention of greenwashing in December 2022. On this occasion, it mandated the Confederation's executive bodies to organize the implementation of the principles of this position. The Federal Department of Finance will submit a draft ordinance for consultation by August 2024. This draft will propose a common definition of the "sustainability objectives" of a financial product, which will be applicable to the entire financial market in all its activities (investment process, management, distribution, reporting).
The Federal Council's position is explicit: a financial product or service presented as sustainable or having sustainability objectives must have, in addition to its financial objectives, at least one of the following investment objectives: (1) alignment with one or more specified sustainability objectives; or (2) contribution to the achievement of one or more specified sustainability objectives. These different objectives are associated with defined management strategies (positions in issuers with transition plans, impact investing, shareholder engagement, credible assets, etc.). However, the details of these requirements are not yet known.
However, if the financial sector presents a self-regulatory system that effectively implements the Federal Council's position, the FDF could dispense with its regulatory work.
Total financial market
Federal Council's position on preventing greenwashing in the financial sector
The Swiss Financial Market Supervisory Authority (FINMA) is preparing a circular on the management of nature-related financial risks by banks and insurance companies, in order to provide a framework for financial risk management by Swiss financial institutions. Its proposal incorporates the recommendations of international initiatives such as BCBS,IAIS and NGFS. It focuses on the development of procedures for identifying and quantifying the risks associated with sustainability factors, the distribution and control of responsibilities, and the assessment of the materiality of risks, with several temperature and transition scenarios.
Consultation on FINMA's proposal closed at the end of March 2023, and the circular is expected to come into force on January 1ᵉʳ 2025. To take account of feedback from the stakeholders consulted, the final circular could include transitional measures as well as significant changes to its content.
Banking and insurance
Nature-related financial risks: explanatory report
ESG Connect's functionalities can support Swiss players in their alignment with the new requirements of the Swiss Confederation. They enable them to define sustainable investment strategies and monitor a range of indicators efficiently, while limiting the costs and risks associated with ESG processes. Our ESG Operating System enables :
Navigating between regulations is made easier, and future developments are anticipated for easy implementation.
